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Requiem for the Corporate PC

By Nicholas G. Carr The invention of the PC back in the 1970s was an epochal event, a technological leap that changed the course of business history. PCs dispersed the power of computing to individuals, spurred ingenuity, and boosted personal productivity. They made companies leaner and smarter. Perhaps most important of all, they sped the development of networks, leading ultimately to the establishment of the Internet as a thoroughfare of commerce.

But the rise of robust, high-capacity networks has also made the desktop PC less essential. Computing resources -- from processing power to storage capacity to applications -- can increasingly be provisioned to users from afar. And that's exactly what's happening.

To gain economies of scale, companies are consolidating their hardware and software assets in central data centers or even renting the capabilities they need from far-flung utility suppliers. Unlike in the home, where the PC is the engine of computing, in business it's just a cog -- and not even a particularly important one anymore.

CAPACITY VS. NEEDS. Just think how little of a modern PC's power is actually used. Most workers employ their desktops for a few routine tasks -- typing reports, creating presentations, running spreadsheets, checking e-mail, browsing the Web. These aren't exactly the kind of applications that require the latest Intel (INTC) or Advanced Micro Devices (AMD) chip.

Most of those uses matured years ago. With each new upgrade, the gap between the capacity of PCs and the needs of average business users yawns wider. IBM (IBM) estimates that about 95% of the average desktop's available computing cycles go untapped. And as for those gigabyte-rich hard drives, just take a peek into your own. Odds are it's either empty or crammed with junk.

Some argue that PCs have become so cheap it doesn't matter that they're largely wasted. But that's silly. Sticking a capital asset worth $1,000 or so on every desk in a company -- and then replacing it every few years -- is no trivial expense. It becomes even less trivial when you factor in the considerable labor and other costs that go into maintaining and updating fleets of workstations and all the software that runs on them.

"RIDICULOUS DEVICE."Then there's the fact that PCs often represent the biggest security hole in today's companies, a gateway for the evil-minded hacker and a repository of ready evidence for the litigious. It's getting harder to look at a business PC and not see an anachronism waiting to happen.

Yes, others have said similar things before. In the late 1990s, Oracle (ORCL) CEO Lawrence Ellison took a load of flack for calling the PC "a ridiculous device" and predicting it would be supplanted by so-called thin clients -- terminals and other stripped-down appliances connected to central computers and applications. But if Ellison's timing was off, his assessment was not.

Today, real alternatives are out there, and they're getting better all the time. Companies like Wyse, Neoware (NWRE), and Sun Microsystems (SUNW) are offering cheap, durable desktop terminals that draw all their power, storage, and applications from central servers. They don't even have their own operating systems. Researchers at IDC predict that the thin-client market will expand at an annual clip of nearly 23% through 2007, far outpacing the growth in PC sales.

THINK BEFORE SPENDING. On the software side, Web-based and -hosted applications, which users can tap into through a simple browser interface, are proliferating. As the utility-computing model takes hold, the case for keeping desktop computers in companies will only grow more tenuous.

We're currently in the midst of a big new upgrade cycle. U.S. companies spent about $97 billion on PCs and related hardware in 2004, and that's expected to jump to $110 billion this year, according to Forrester Research. That's great news for suppliers like Dell (DELL) and Microsoft (MSFT), Intel and Hewlett-Packard (HPQ). But before the next cycle rolls around, business executives would do well to ask themselves exactly what they're getting for all that dough. Nicholas G. Carr is the author of Does IT Matter? Information Technology and the Corrosion of Competitive Advantage.

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